BG takeover offer undervalues assets

By Jane Shanahan

Tuesday 19th August 2008

Origin Energy, Australia's biggest producer of coal-seam gas, urged shareholders to reject BG Group's hostile A$13.8 billion takeover bid, saying it undervalues the company's assets and prospects.

Origin is seeking partners to help develop its gas, which is used to produce liquefied natural gas and says it is in a strong position to benefit from rising energy prices and rising demand. Selling to BG Group may harm the company's ability to reap the benefits, Origin said.

Shares of Origin fell 1% to A$16 today, above BG Group's A$15.50 per share cash offer. Analyst valuations range from $17.01 to $20, "materially above BG's offer," chairman Kevin McCann said in a statement. The shares have traded above the bid price since BG Group first made the offer as some investors bet the UK company would pay more to secure gas reserves for an A$8 billion LNG export platform in Australia.

"Origin has outstanding prospects as a strongly performing Australian integrated energy company with increasing exposure to growing demand and higher prices for Australia's natural resources," McCann said.

A takeover would have implications for New Zealand's stock market, as BG Group has signaled it would sell Origin's half stake in Contact Energy, the biggest utility on the NZX. Contact fell 0.9% to NZ$8.51. The stock has gained 5% this year, outpacing the NZX 50 Index, which declined 17%.

BG Group, a UK oil and gas producer, planned to use its own funds and a syndicated loan from a group including Banco Santander, HSBC Bank Plc, Societe Generale and Royal Bank of Scotland.

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